WWE’s market smackdown is a blow for the cord-cutting future

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Shares in World Wrestling Entertainment, Inc. are getting absolutely crushed today—the stock of the wresting and entertainment company is down 42% and now underperforming the market in 2014. That’s not just bad news for the Connecticut-based company’s colorful CEO, Vincent McMahon. It’s also dispiriting news for people who hope content providers will eschew their relationships with cable companies and sell content directly to consumers over the internet.

WWE recently launched a $10-a-month internet streaming service that gives subscribers full access to all of its pay-per-view specials, plus other original (mainly archived) content. Its weekly shows aren’t available until 30 days after they’ve aired on broadcast TV.

Previously, the main way to get access to events such as WrestleMania or Royal Rumble was on a pay-per-view basis through a cable, satellite or telecom provider. So conceptually, the WWE Network’s internet streaming system is a bit like what fans of HBO’s premium-cable content have been asking for—the ability to subscribe to HBO Go (that network’s streaming app) without a full pay-TV subscription (something that the company is resisting).

WWE has said it needs about 1.4 million subscribers to the online network to fully offset the lost income from pay-per-view and subscription video-on-demand packages though pay TV providers. But in an update to the market today (where it also announced it had renewed its broadcast deal with NBC) the company said not only that it is not yet there, but it “cannot provide any assurances regarding the length of time, if at all, that it would take to reach the level of subscribers” it needs to break even.

Other content owners, including sporting organizations and the likes of HBO, will no doubt be watching the WWE experiment closely. Markets have a tendency to be short-sighted, and WWE’s system might still prove to be a smart move in the long term. But it suggests that breaking out of the cable bundle is not a painless exercise.